Two income statements for Toby Sam Enterprises are shown below: Toby Sam Enterpr

ID: 2618504 • Letter: T

Question

Two income statements for Toby Sam Enterprises are shown below:

Toby Sam Enterprises

Income Statement

For the Years 2 and 1 Ending December 31

Prepare a vertical analysis of Toby Sam Enterprises' income statements.

a. Has operating income increased or decreased as a percentage of revenue?

b. By what percentage? Round to the nearest whole number.

In order to earn credit for your answers to the problems, you are required to show all supporting work.

Toby Sam Enterprises

Income Statement

For the Years 2 and 1 Ending December 31

Year 2 Year 1 Fees earned $705,000 $520,600 Operating Expenses $472,045 $338,390 Operating Income $232,955 $182,210

Explanation / Answer

Solution:-

a) Decrease

b) By 2%

Calculations:-

Particulars

Year 1

Year2

Operating income as a percentage of revenue

=Operating income/Fee earned

=($182,210/$520,600)

=0.35

i.e. 35%

=$232,955/$705,000

=0.3304

i.e. 33.04%

Hence the operating income as pa percentage of revenue is decreased .

The percentage decrease = 35%-33.04%=1.96% i.e 2%

Please feel free to ask if you have any query in the comment section.